2015 (11) TMI 56 - HC - Service Tax

Dismissed appeals due to ineligibility under VCES; Penalties and interest leniency considered

Uttarakhand Van Vikas Nigam Versus Union of India and others

The appeals were dismissed as the appellant was deemed ineligible for the benefits of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 ... Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - inquiry or investigation which is pending - Scope of notices correspondence between assessee and department - goods transport agency service - Notification No. 42/97-ST dated 05.11.1997 - Held that:- Intention of the Legislature appears to have been, undoubtedly, to entice large number of persons into paying the service tax dues with the assurance that, if the terms of the Scheme are complied with, they will not have to pay penalty and interest. This is, undoubtedly, for alluring such persons so that there is an increase in the revenue of the Government. But, at the same time, the Legislature was conscious of the criticism that could be levelled against such a Scheme being in the nature of promotion of dishonesty. It, therefore, felt that the Scheme should be limited to those cases, where there were no proceedings at all pending and where the concerned assessee may have, out of ignorance which is partly contributed to by the revenue in not taking any sort of action against them, not made payments, which they were otherwise liable to pay. This interpretation of ours appears to be inevitable on the clear language of Section 106 read as a whole and in part. In the show-cause notice issued, it is stated that, though the amount was deposited on 31.03.2013, it was when the investigation was pending. A reply was given by the assessee. The reply as such is not before us, but the learned counsel for the appellant would submit that the reply has been faithfully reproduced in the impugned orders. In the impugned orders, there is no reference to the Circular as such. In other words, there is no case set up by the assessee before the authority that the notices issued under Section 14 of the Central Excise Act were of a roving nature. Besides that, as we have already noticed, the notices do specifically refer to the transport service from out of the many services, which the appellant do perform, and the documents are sought with reference to the same. Having regard to the same, we would think that it would be a futile attempt to again remit the matter back to the authority for a de novo consideration. There was no interdiction by this Court against the authority considering the matter. In the circumstances of this case, therefore, noticing that the matter would be a futile exercise, we would decline to undertake the exercise of remitting the matter back. In regard to the payment effected being prior to the Scheme, we would think that, insofar as the payment was effected not as on 01.03.2013, but thereafter, namely, on 31.03.2013; though the express words of Section 107 appear to contemplate payments being made after the Scheme, but, insofar as requirement is that 50 per cent is to be paid prior to 31.12.2013 and the payment effected in this case being of the full amount prior to 31.12.2013, we would think that the appellant’s case cannot be thrown out on that ground. - Decided against assessee. Issues Involved:1. Service Tax Liability under 'Goods Transport Agency Service'2. Applicability of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES)3. Validity of Notices Issued under Section 14 of the Central Excise Act4. Eligibility for Immunity from Penalty and Interest under VCES5. Consideration of Circulars and Clarifications Issued by the DepartmentIssue-wise Detailed Analysis:1. Service Tax Liability under 'Goods Transport Agency Service':The appellant, Uttarakhand Forest Development Corporation, received communications from the Directorate General of Central Excise Intelligence regarding the payment of service tax under the head 'Transport of goods by Road Service.' The communications were issued under Section 14 of the Central Excise Act, indicating that the appellant's organization incurred significant freight/transportation charges for transporting wood and minerals, making them liable for service tax.2. Applicability of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES):The appellant sought to benefit from the VCES, which came into force on 10.05.2013. The Scheme was designed to encourage voluntary payment of service tax dues without penalties or interest. The appellant registered under the Scheme on 06.03.2013 and deposited Rs. 1,45,45,813 as service tax on 31.03.2013. However, the declaration made in November 2013 was rejected by the designated authority, leading to the present appeals.3. Validity of Notices Issued under Section 14 of the Central Excise Act:The appellant contended that mere issuance of proceedings under Section 14 of the Central Excise Act should not suffice to deny the benefit of the Scheme. The Court, however, found that the Scheme expressly bars persons against whom notices have been issued or orders have been passed under Sections 72, 73, and 73A of the Finance Act, 1994. The issuance of summons under Section 14 of the Central Excise Act, which is made applicable to service tax matters by Section 83 of the Finance Act, 1994, was deemed sufficient to take the appellant out of the Scheme's purview.4. Eligibility for Immunity from Penalty and Interest under VCES:The appellant argued that they should be treated at par with other honest taxpayers and that a liberal approach should be adopted. The Court noted that the Scheme aims to entice persons into paying service tax dues with the assurance of immunity from penalties and interest. However, the Court found that the appellant was not eligible for the Scheme due to the pending investigation under Section 14 of the Central Excise Act. The Court also noted that the payment made on 31.03.2013 could not be considered as fulfilling the Scheme's requirements, which contemplate payments being made after the Scheme's commencement.5. Consideration of Circulars and Clarifications Issued by the Department:The appellant referred to several Circulars and Clarifications issued by the Department to support their case. The Court examined these Circulars, including Circular No. 169/4/2013-S.T., dated 13.05.2013, and Circular No. 170/5/2013-S.T., dated 08.08.2013. The Court found that the Circulars clarified that the provisions of Section 106(2)(a)(iii) would be attracted only in cases where accounts, documents, or other evidence are requisitioned by the authorized officer under statutory provisions. The notices issued to the appellant under Section 14 of the Central Excise Act were found to be specific and not of a roving nature, thus justifying the rejection of the declaration under the Scheme.Conclusion:The appeals were dismissed, with the Court holding that the appellant was not eligible for the benefits of the VCES due to the pending investigation under Section 14 of the Central Excise Act. The Court also noted that the payment made on 31.03.2013 did not fulfill the Scheme's requirements. The Court recorded the respondents' submission that the authorities would consider the issue of penalties and interest leniently under Sections 73(3) and 80 of the Finance Act, 1994.